Simon S. Kuznets 1901–1985

NATIONAL ACADEMY OF SCIENCES SIMON S. KUZNETS 1901–1985 A Biographical Memoir by ROBERT W. FOGEL Any opinions expressed in this memoir are those of the author and do not necessarily reflect the views of the National Academy of Sciences. Biographical Memoirs, VOLUME 79 PUBLISHED 2001 BY THE NATIONAL ACADEMY PRESS WASHINGTON, D.C. Courtesy of Harvard University, Cambridge, Massachusetts SIMON S. KUZNETS April 30, 1901–July 9, 1985 BY ROBERT W. FOGEL HIS MEMOIR PRESENTS AN account of the scholarly career T of Simon S. Kuznets. Among the issues considered are his contribution to the development of the empirical tradition in economics; his transformation of the field of national income accounting; his use of national income accounting during World War II to set production targets for both the military and civilian sectors of the economy and to guide the implementation of those targets; his development of a theory of economic growth; his investigation of the interrelationship between economic growth and population growth; his contribution to methods of measurement in economics; and his legacy to the economics profession. Simon S. Kuznets, recipient of the third Nobel Prize in economics, was a pivotal figure in the transformation of economics from a speculative and ideologically driven dis- cipline into an empirically based social science. Born in Pinsk, Russia, on April 30, 1901, he received his education in primary school and gymnasium in Kharkov. He served briefly as a section head in the bureau of labor statistics of the Ukraine before emigrating to the United States in 1922. He entered Columbia University where he received his B.A. in 1923, his M.A. in 1924, and his Ph.D. in 1926. His princi- 203 204 BIOGRAPHICAL MEMOIRS pal teacher at Columbia and his lifelong mentor was Wesley Clair Mitchell, a founder of the National Bureau of Eco- nomic Research (NBER) and its director and codirector of research from 1920 to 1946. Kuznets was a member of the research staff of the NBER from 1927 to 1961. It is there that he met Edith Handler. They were married in 1929 and had two children, Paul and Judith. Kuznets also held professional appointments in economics and statistics at the University of Pennsylvania (1930- 54) and in economics at Johns Hopkins (1954-60) and Harvard (1961-71). During 1932-34 he served in the De- partment of Commerce, where he constructed the first offi- cial estimates of U.S. national income and laid the basis for the National Income Section. During World War II he served as the associate director of the Bureau of Planning and Statistics of the War Production Board. Kuznets was instru- mental in establishing in 1936 the Conference on Research in Income and Wealth (which brought together government officials and academic economists engaged in the development of the U.S. national income and product accounts) and in 1947 helped to establish its international counterpart, the International Association for Research in Income and Wealth. He served as advisor to the govern- ments of China, Japan, India, Korea, Taiwan, and Israel in the establishment of their national systems of economic information. Despite his extensive activities in the design of government programs of economic intelligence and his work in consulting with such private agencies as the Growth Center of Yale University and the Social Science Research Council, Kuznets was a prolific analyst of economic processes and institutions. During the course of his career he produced 31 books and over 200 papers, many of which set off major new streams of research. Among the fields in which he pio- SIMON S. KUZNETS 205 neered, in addition to national income accounting, were the study of seasonal, cyclical, and secular fluctuations in economic activity; the impact of population change on economic activity; the study of the nature and causes of mod- ern economic growth based on the measurement of national aggregate statistics; the household distribution of income and its trends in the United States and other coun- tries; the measurement and analysis of the role of capital in economic growth; the impact of ideology and other institu- tional factors on economic growth; changing patterns in consumption and in the use of time; and methods of economic and statistical analysis. Kuznets’s intellectual contributions were acknowledged by his colleagues in many ways, including his election as president of the American Statisti- cal Association in 1949 and of the American Economic As- sociation in 1954. THE CONTEXT OF KUZNETS’S WORK To appreciate the magnitude of Kuznets’s contributions to the empirical tradition in economics it is necessary to understand the intellectual currents in the American social sciences when he first encountered them in the early 1920s, and the social and political movements that promoted the social sciences during the last quarter of the nineteenth and the early decades of the twentieth century. Social sciences were just beginning to emerge as disciplines before the Civil War. Even though economics was the most articu- lated of the nascent social sciences, it was treated not as an independent subject but as a segment of a year-long required course in “moral philosophy,” which was usually taught to seniors by an ordained minister who surveyed revealed knowledge about the operation of the temporal world. The textbook in the economics portion of this course most widely used in American universities during the 1840s and 1850s 206 BIOGRAPHICAL MEMOIRS was written by Reverend Francis Wayland, president of Brown University and a principal leader of the Northern Baptist Church. The objective of his textbook, he wrote, was to set forth God’s laws, so far discovered, regarding the production and distribution of those products that constitute the material wealth of a nation. The primacy of religious crusaders in economics and the other principal social sciences continued down to the beginning of the twentieth century. About 40 percent of those who founded the American Economic Association (AEA) in 1885 were either ordained ministers or lay activ- ists in evangelical churches. The platform adopted at that meeting called for the united effort of churches, the state, and science to promote Christian social reform. The influence of Richard T. Ely, an economist at the University of Wisconsin, and other academic leaders of the Social Gospel movement (the name given by historians to a religious/ political movement that was influential between 1880 and 1930) in the AEA remained strong down to World War I. That influence was made conspicuous by the organizational identification of the AEA with issues that were at the time as highly controversial as the limitation of female participa- tion in industry, the promotion of state and local taxes to fund entitlements, and the promotion of severe restrictions on immigration. This crusading posture was challenged by more secular economists, by those with affiliations to nonevangelical churches, and by those whose economic analysis was orthodox. Although the more orthodox economists gradually became ascendant, it took decades for the AEA to free itself from a lingering commitment to Social Gospel ideology and to become dedicated to objective presenta- tion of evidence and rival theories regarding the function- ing of the economy. There was an important but smaller group of empiri- SIMON S. KUZNETS 207 cally oriented economists. Some of them were associated with the Bureau of the Census, which included a survey of economic activity in the decennial census of 1840. As the economy became transformed by accelerating technological change, the subsequent censuses collected increasingly detailed information on the agricultural, manufacturing, and transportation sectors. The economists associated with these efforts also produced illuminating analyses of the struc- ture and development of such pivotal industries as iron and steel, cotton textiles, and meatpacking. After the Civil War, a number of states set up bureaus that inquired into the conditions of labor and the standard of living of industrial workers. Led by Massachusetts, these agencies, beginning about 1875, began collecting samples on the income, expenditures, and housing of industrial workers. Toward the turn of the century, a similar program was established at the federal level with Carroll D. Wright, the economist who pioneered such studies in Massachusetts, serving as the first commissioner of labor. Between 1880 and World War I, a number of factors provoked alarm about the deterioration in the conditions of industrial labor. These included technological changes that promoted large-scale enterprises at the expense of small ones, huge waves of immigration that depressed wages, pitched battles between workers and factory owners that required federal troops to quell them (with large losses of life and property), and the increasing severity in business cycles, culminating with the depression of 1893-98, when one out of every six workers was unemployed. The belief that (despite many remarkable technological advances and the obvious affluence of the upper classes) conditions of life had deteriorated for urban workers and for farmers persisted down to the outbreak of World War I. A number of economists who served on the War Pro- 208 BIOGRAPHICAL MEMOIRS duction Board and in other agencies involved in mobiliza- tion of the economy during World War I were appalled at the lack of relevant economic information. Several of them concluded that this problem was unlikely to be solved within the federal government and in 1920 established a private, nonprofit, nonpartisan agency called the National Bureau of Economic Research (NBER) to construct national income accounts, collect information on business cycles, and to study the distributions of the national income among households, with the aim of making such information avail- able to both public and private agencies that could use them in the formulation of their policies.

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